“What if this money goes back in cash or Treasuries as yields rise?” the analysts questioned.
Fueling Citigroup analysts’ concerns, the U.S. bond fund market already experienced a $61.7 billion in net redemptions through one period last June in response to the Fed signaling a tapering plan. Once the Fed begins hiking rates next year, some are concerned that the renewed tightening rhetoric would instigate another broad sell-off, as opposed to putting the focus on reasons for raising rates in the first place, such as controlling a quickly expanding economy.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of LQD, HYG and JNK.